Yuengling, Protectionist Beer Mongers

UPDATE April 21, 04, I think Yuengling is a fantastic beer. This article is just a fun way of pointing out some technology and policy concepts, and not meant to bash this fine brew. Its also meant to piss off Mr. Tom Curry.
adam

Looks like good old Yuengling brewery of famous Pottsville, PA has been using Prohibition era beer laws to keep their dominant position in PA. A good read of how a small firm has used the inertia of laws designed to limit beer consumption in order to dominate the local suds market. But, they're now moving out from sleepy PA to pry open markets in Alabama, New York and beyond. Will Boston be next?

This reminds me a lot of Electricite de France. They too use protectionist policies to remain dominant in France, but push aggressively to establish new markets in other countries.

From the WSJ

...

Now, keg by keg, America's oldest brewery is expanding outside of Pottsville, Pa. Thanks to quirky state laws, the brewer has been able to hold its own at home against Anheuser-Busch Cos. and SABMiller PLC's Miller Brewing Co. But those laws are being challenged, and D.G. Yuengling & Son has responded by pushing into New York, Florida, North Carolina and even Alabama.

....

Last year, Yuengling, which is sold in nine states, boosted its national market share to 0.6%, equal to that of Boston Beer Co., maker of Samuel Adams, which is sold all over the U.S., according to estimates by Beer Marketer's Insights, a trade publication. ....

But the brewer's secret weapon is the state's arcane beer regulations, which have protected it from interlopers. Pennsylvania beer drinkers can't purchase beer in supermarkets or convenience stores, where the big brewers often squeeze small brewers off the shelves. Instead, consumers have to go to beer distributors or taverns. The beer distributors account for an estimated 70% of the state's beer sales, but by law they have to sell full cases, reducing the effectiveness of the big brewers' discounting tactics. Neighborhood taverns and delis can sell six-packs or 12-packs, but the prices there are generally quite high.

The state rules, which date to 1934, the year after Prohibition ended nationally, were intended to limit alcohol consumption and protect Pennsylvania's vibrant brewing culture from outside breweries. Through the Pennsylvania Small Brewers Association, a lobbying arm for small state brewers, Mr. Yuengling has opposed any changes in the law. "These laws have enabled small brewers to survive," says the 61-year-old Mr. Yuengling.

He may have a point. The market share of Anheuser-Busch, which accounts for about half of all national beer sales, is just under 29% in Pennsylvania, lower than in any other state, according to Impact Databank, which monitors the industry. And while niche microbrewers have had some success around the country, Yuengling holds an unusually large 13% share of the Pennsylvania market.

But these days, rivals intent on changing the status quo are challenging Yuengling. Jay Goldstein, a beer lobbyist who also serves as president of the Pennsylvania Beer Wholesalers Association, representing wholesale distributors for both large and small brewers, argues that the state system is unfair to beer drinkers and out-of-state brewers alike.

Mr. Goldstein and the Malt Beverage Distributors Association of Pennsylvania, the lobbying arm of beer distributors, say changing the law to allow distributors to sell 12-packs is critical. They point out that consumers pay only $5.99 to $6.99 for a six-pack of a craft beer such as Samuel Adams in most states, but in Pennsylvania buying such a six-pack at a tavern could cost as much as $8.75.

Consumers concerned about price buy cases from the distributors. But cases of beer from local independent brewers such as Stoudt's Brewing Co. in Adamstown and Troegs Brewing Co. in Harrisburg can cost as much as $25, compared with closer to $15 for nationally distributed domestic beers. The local brewers depend on adventuresome drinkers to give their products a try, but $25 is a big gamble. Local beer drinkers have noticed: The tax funds received from Pennsylvania beer shipments slipped 5.4% in 2003, the worst such decline in 20 years, as some consumers went out of state to buy their beer, even though cross-border sales of alcohol are illegal.

"The packaging law kills small brewers and makes sure Dick Yuengling's position is never interrupted," says Mr. Goldstein. "It's not Bud they are trying to put down, it's their fellow small brewers," which haven't yet established themselves. The Pennsylvania Liquor Control Board says 52 small independent Pennsylvania breweries have gone out of business in the past five years.

Mr. Yuengling insists his rivals are missing the big picture. The looming threat isn't lackluster beer sales or even Anheuser-Busch, he says. It's any move closer to allowing beer sales in supermarkets, which could eventually include big retailers like Wal-Mart Stores Inc. Once stores like Wal-Mart are allowed to start selling pallets of deeply discounted beer, he argues, small brewers, beer distributors and even wholesalers could be forced out of business.

Despite Mr. Yuengling's opposition, many believe change is inevitable, and Yuengling, which derives an estimated 65% of its sales from its home state, would be particularly vulnerable.

...

Is this the story of a small hometown producer using regulations to protect local culture from the market powers of Anheiser Bush? Or simply more protectionism thats keeping us beer fans poorer? This has the potential to be a great Ken Oye case study... Tom, you should pick up the ball.

Adam Smith

Comments

[Tom]

I had planned on composing a defense of Yuengling but I haven't felt the burn. Instead, here is more fuel for the fire, Yuengling is in hot water in Pottsville for not installing wastewater flow meters. The excuse:

With mounting environmental pressure, Yuengling said he has concerns about operating the old plant and also questioned the fairness of demands by federal and state environmental agencies.

The "old plant" is America's Oldest Brewery. Yuengling is not going to stop operating that brewery, it is part of the mystique - but Mr. Yuengling gives these veiled threats about how difficult it is to run the old brewery every once and a while. Another way to play the system.

Yuengling has a recent history of violating environmental rules, in 2000 they were fined $137,500 for 20 violations of a wastewater pretreatment permit.

[Mike]

I am absolutely offended. They are wasting beer? Beer doesn't belong in our streams... it belongs in our pints!

Down with beer wasters!

[Tom]

You may have hit on something, Mike, I always wondered why Schuylkill County water tastes so good.

[Kevin]

Wasting Good Lager! It's Criminal dammit! I Live a thousand miles away and travel back once a year for a good Philly Cheesesteak and Yuenglings. Both Great Products of the Home State. The question is do you want to relax sales to supermarkets. Not a good Idea. Keep the Distributors. Change is not always good. Will the supermarkets pay the state fees that the Distributors do? I think not rather they would pay a straight (Lower)percentage.

[Yuengling]

I stumbled across your site and figured I'd comment from a (semi-)local.

Being from the Southwest and having been innundated with crappy beers (think Coors and Budweiser) through my informative years (college), I was delighted to find Yuengling lager when I moved to the suburbs of Philadelphia in 2000.
I am not a big beer drinker. I will drink one, at most, two beers at a time, but Yuengling is one of those beers that I can consume great quantities of and be happy with the aftertaste. The metallic *ping* that goes off in one's mouth after imbibing is undescribably good.
So more power to the little guy. When he's got a bigger than 1% market share, I'm sure restrictions will lift and Budweiser and Coors will come stomp the snot out of them. Until then, I will enjoy my Yuengling!

....This whole beer distributor thing...now THAT is confusing to someone not from a prohibitionist state :-)

[Michael]

I recently started working in the Philly area and am now a big fan of Yuengling. I also am from St. Louis, home of AB. In both Missouri and across the river in Illinois beer is sold in grocery stores. I feel like I am turning back time seventy five years trying to buy a beer here in PA.

Anyway, in St. Louis there is also a very nice local brewery named Schlafly. They do quite well selling their beer at their pub and in grocery stores and bars all over AB's home turf. I don't know what their market share is, but they recently expanded their operation to include a new plant, so they seem to be a healthy company.

Their beer is a little more expensive, but most people who like a different tasting beer don't mind paying the extra price. I am sure, like most markets, if PA ever gets out of the ninteenth century the price of all beer in the state will drop. Then Yuengling will make the necessary adjustments to price, still be a little more expensive than AB and Miller, and beer drinkers who like the taste will still buy it, but everyone will save time and money.

[Lew Bryson]

I do this for a living. I've been writing about Yuengling for over 10 years. Beer prices in PA are some of the lowest in the country: our state beer taxes are tied for second-lowest. The WSJ guy got it wrong (as so many people do): the PA 'case law' had nothing to do with Prohibitionists. The case law was put in place by the wholesalers themselves; they didn't want to mess around with six-packs, just cases. They wrote up a sample code, presented it to the legislators, and it passed.
PA draft beer is historically some of the lowest-priced in the country. And if I can't get beer in the supermarkets, well...I've lived in seven other states where you could, and frankly, I'm not impressed. I'd rather buy it from someone who knows what they're talking about, not someone who's pushing pork chops and aluminum foil.
Yuengling costs more than Bud and Miller because they CAN. It used to cost less, and for good reason: they were practically debt-free, and spent very little on advertising. Yuengling raised their prices because they couldn't make beer fast enough.
I can't blame them for wanting to keep things the way they are. I'd love to see 6-packs sell at distributors, and there's no reason why they shouldn't. But inertia is a tough thing to beat.

[Toni]

My husband and I own a beer distributor. There are 1300 distributors in PA. You can get a good variety of beers from us and if we don't have something we can get it in. If grocery stores begin to sell beer-hope you like bud-coors lite-and miller-that is all you will likely find.

[Tom, a born and bred Skook (that's Schuylkill Co.)]

Yings and Wings is a great way to spend a Friday night with friends, but I definitely enjoy microbrews. With the distributor setup it is very difficult to sample different beers. I would welcome the chance to buy a six-pack of Troegs or Weyerbacher or Sam Adams, etc. versus a whole case.

[unto ryodi]

Lets not forget the fact. If u make good beer people will buy regardless where u buy it. There will always be those who stick to there buds and coors and millers, sorry to say they dont know of any better.

[scott]

I'm a Yuengling fan, and was just wondering, which 9 states sell it, and what's stopping the other 41? Until I found this post, I had no idea that these twisted alcohol laws existed.

[Dave]

I moved to PA right out of college 27 yrs ago and buying beer is just as frustrating now as it was back then. I must also buy beer separately from wine & liquor purchases. Being able to buy beer on Sunday now helps me very little. Being forced to buy a case or pay an outrageous price for a 6-pack greatly reduces my chance of trying other beers. It is bizarre that it is easier & less expensive for me to sample my local PA microbrew when I travel out of state.

[Barry Decker]

I'm one of the St. Louis natives that was so recently betrayed by the great AB sellout. I've been drinking (a lot) of Budweiser for the past decade or so, and suddenly found myself needing to find a new beer I could be proud of. An All-American beer that could compete with Europe's hand-pulled and clay-topped masterpieces. I moved to VA right in the middle of the sellout, and found myself at a bar in Richmond, brooding over a glass of Yuengling, wondering if it would be Apple Pie or Independence Day that would be sold off next, when I realized that I was drinking an excellent beer......a really excellent beer. One in fact that WAS American, more so that even the great AB beer. I have found my new sustenance of choice, and encourage worldwide domination. If you see significant sales increases in the Richmond area, you know I am hard at work!!!!

[Mark D. Withers]

I remember traveling to FL quite a few years back and was shocked to see wine in a dollar store, let alone beer at the 7-11. Recently now that several supermarkets have figured out how to sell beer (Weis and Wegmans) I hope to see 6 packs someday at the local beer store....and by the way, in April when I was in Nashville I fell over when I got Yuengling Larger at BB Kings! Of course not Boston Brewing Co is here in the Lehigh Valley near Fogelsville.....well gotta go get a cold one....

[Chris Mancia]

I´m from Archbald P.A. and right now I´m in Brazil. I´ve actually found a restaurant that serves yuengling!!!!